Court's Broad Interpretation of Definition of Securities Contracts Promotes Expansive Scope of Bankruptcy Code Safe Harbor

Summary

This article discusses a recent decision addressing Section 546(e) safe harbor. Section 546(e) of the Bankruptcy Code's safe harbor preventing avoidance in bankruptcy of certain securities, commodity, or forward-contract payments has long been a magnet for controversy. Several noteworthy court rulings have been issued in bankruptcy cases addressing the application of the provision, including application to financial institutions, its preemptive scope, and its application to non-publicly traded securities.